The Dice Throw…

Wednesday, April 29th, 2009 at
6:17 AM

I have said in at least a couple of the articles I have written about Forex Trading and the Money markets that Trading should be as far from gambling as possible. This rule holds true for all traders, but is particularly important for people who are just starting forex trading…newbies. If it feels like a dice throw, then you’re doing it wrong. Bringing Money Management strategies in obviously helps to mitigate risks, but you want to keep the risk minimal to start with.

The reason I bring this up is because of an article on Bloomberg.com. Five years ago, Alan Greenspan said that predicting currencies is no better than tossing a coin. It’s true that things have a been a tad unpredictable lately. However, that comes with the territory. We’re in the midst of an economic upheaval. A lot is driven by fear or lack of it. Still, you can still make a decent play, even in this condition, as long as you stick with the rules.

The currency pairs haven’t changed much against the dollar in the last 2 days. Well, that’s not exactly true. There has been quite a bit of movement. It’s just that we are back to where we were at the start of the week. It’s the same story. It’s starting to get old now. Fear = Dollar Strength. The changes to that are proving hard to sustain in this climate.

A further complication is that Swine Flu pandemicoutbreak which is spreading all over the world. Trying to contain it at this point is…well…pointless. The cat is out of the bag. The possible scenarios are quite scary. For now, it seems that almost all the reported deaths have occurred in Mexico, where this whole thing began. I think it’s safe to say that some of that is going to start spreading around. Predictably, the markets reacted with apprehension. More Dollar strength. That abated today because of confidence in the US. If things get worse with the Swine flu, expect more Dollar strength. Everything affects everything.